Dogecoin ($DOGE) is a cryptocurrency that was created in 2013 as a joke by its developers, Billy Markus and Jackson Palmer. Despite its origins, DOGE has gained a significant following and has even been used for charitable causes and as a form of payment for goods and services. One question that many people have about Dogecoin is whether it has a cap or supply limit.
Cryptocurrencies are innovative digital currencies that rely on encryption to track purchases and transfers, hence their name “cryptocurrency.” It’s been around since 2009, when the first cryptocurrency, Bitcoin, was created. Since then, buying bitcoin has been one of many ways to get into cryptocurrency since many others have been created, such as Dogecoin and Litecoin.
Although cryptocurrencies are easier to create than traditional paper currencies, they’re often much more secure than conventional banking. Cryptocurrency uses encryption techniques, which means people can use it for secure transactions that cyber criminals can’t tamper with.
Another trait that cryptocurrencies have that traditional currencies don’t is that the former typically has a supply cap or simply a “cap.”
What is a Cap?
In traditional fiat currencies, the supply of money is controlled by central banks, which can increase or decrease the supply as needed through monetary policy. Cryptocurrencies, on the other hand, are often decentralized create new units of the currency through mining or staking. Most cryptocurrencies have a limited supply, which means that there is a maximum number of units that will ever be created, a supply cap.
Supply cap is a term that describes the maximum number of coins that some cryptocurrencies can create. It’s as if the United States Treasury decided only to print 1 trillion dollars and to stop printing once the number was reached.
The supply cap is often tied to the total supply of coins and is usually set at 100 percent. It means all the coins of a certain cryptocurrency have been issued, and there’s no way to create or mine for more.
Why does this matter? Because if you are interested in investing in a cryptocurrency, you want to know precisely how inflationary it may be to understand how your holdings may be diluted over time.
Does Dogecoin Have a Cap?
Dogecoin does not have a cap, which means there is no supply limit. However, there is a fixed reward of 10,000 DOGE for each block added to the Dogecoin blockchain that is attributed to miners.
Miners are incentivized to continue mining for Dogecoins because of these rewards. Once they reap mining rewards, they can transfer them from their wallets to a crypto exchange where other investors can buy them. As more miners go online, more will place their new coins onto the market, resulting in prices falling.
Because Dogecoin does not have a maximum supply limit, the number of DOGE in circulation is set to keep on increasing over time as more is mined. The meme-inspired cryptocurrency is nevertheless not influenced by the same inflationary forces that affect fiat currencies, but it instead has its own monetary policy.
How Does Dogecoin Work?
Developers Billy Marcus and Jackson Palmer created Dogecoin for people to learn more about cryptocurrency. Famous for its Shiba Inu logo, it was initially traded for a tiny fraction of a penny so people could start sending it to each other for fun. This approach provided users with a unique way to learn more about cryptocurrency.
In 2018, cryptocurrency started to reach the mainstream, catching the attention of investors. By 2021, Dogecoin achieved records with around $0.70 before it crashed to about $0.06 in September 2022.
DOGE is a proof-of-work (PoW) form of crypto, meaning that mining Dogecoin will involve operating powerful computers called that process transactions for the network.
Will Dogecoin Have a Cap?
Dogecoin has never had a cap in the past eight years. In 2017, cryptocurrency started reaching the mainstream audience, and DOGE’s valuation hit $1 billion for the first time. Despite the immense growth, many investors thought the rise in value was a sign of irrationality in the crypto market because DOGE had no unique features.
Fast forward to 2021, DOGE ranked among the top ten cryptocurrencies by market cap.
3 Reasons Why Dogecoin has no Cap
If you’re just learning about cryptocurrency, it can be confusing to understand why some have caps while others don’t. Dogecoin is a cryptocurrency without a cap for the following reasons.
1. Transactions are cheap
Dogecoin developers intentionally made the cryptocurrency inflationary, meaning that DOGE’s supply increases over time. A higher supply of Dogecoin is believed to help maintain transactions cheap. These cheap transactions lower the cryptocurrency’s entry barrier, allowing more people to use it, which matches the developers’ original mission.
In contrast Bitcoin, which has a supply cap, has a much tighter monetary policy that is believed to help its price appreciate as more demand keeps being met with insufficient supply as mining rewards drop.
2. Allows new users to enter the market
Dogecoin will always have coins available for users. If someone were to lose millions of DOGE, the long-term impact it could have is minimal because constantly new coins are circulating.
Additionally, since there is no supply cap, lost coins don’t affect the cryptocurrency’s value too much. In contrast, whenever BTC is lost because it becomes irretrievable in a wallet, its circulating supply drops further.
Bitcoin has a cap, meaning there will be nothing left to mine. What remains – transactions fees paid to miners for including transactions in blocks – will be the monetary incentive for mining to ensure the network’s security.
Dogecoin miners will keep receiving DOGE for finding new blocks and helping secure the network.
Cryptocurrency: Uncertainties and Opportunities
Making the most out of cryptocurrencies begins with understanding the differences between each currency and how they operate; that will determine how much value you will receive if you decide to invest.
In the case of Dogecoin, it’s worth considering its no-supply cap feature, especially with its longevity not affecting them in the long term. Consider speaking to financial experts and doing your research; these will help you protect yourself against financial loss in the uncertain landscape of cryptocurrency.
Featured image via Pixabay.
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